The Lions finally ended a run of five games without a goal thanks to Liam Feeney's fortuitous second-half goal.
But they failed to register their first away win of the season or even take a point as the hosts deservedly fought back through Carl Dickinson and Craig Forsyth.
Kenny Jackett's side started positively as James Henry tried his luck with an early long-range drive but Martin Taylor, making his 250th career league start, bravely blocked.
It was the hosts who went closest in the opening stages as Mark Yeates acrobatically volleyed over the bar from six yards out after 13 minutes.
Marvin Sordell then unleashed a fizzing effort from 20 yards which had debutant Rene Gilmartin scrambling across his goal.
And the Hornets continued to threaten as Dickinson's close-range effort produced a reflex save from David Forde after Paul Robinson had blocked Forsyth's attempt.
The Lions moved to strengthen their squad in midweek with the loan signing of Brian Howard and the Reading midfielder's corner almost opened up the hosts' defence, but Paul Robinson's header lacked direction and he was left to rue a missed opportunity.
Dickinson had more familiar duties to fulfil before half-time, stepping in to deny Tony Craig as he lined up a shot from the middle of the penalty area.
Sean Dyche's men came out fired up for the second half and should have taken the lead within two minutes of the restart but Yeates skewed his shot wide from eight yards.
In a game lacking quality, both sides were too quick to lump the ball forward without much thought about the intended target. But Watford continued to pose a threat and John Eustace went close with a low shot which drifted wide after 51 minutes.
Jackett's men finally ended their barren run in front of goal when Feeney's speculative cross-cum-shot looped off Lloyd Doyley and into the net.
The goal was Feeney's to claim and he celebrated his first for the club since signing from Bournemouth.
Jonathan Hogg tried to drag his side back into the match with a testing effort which Forde did well to keep hold of.
And the home side deservedly drew level after 78 minutes as Dickinson drove into the bottom corner from 20 yards.
There was more to come for the resurgent Hornets as Millwall failed to clear from a corner and Forsyth was perfectly placed to drive the ball in with just five minutes to play.
The defeat leaves Jackett's side languishing at the wrong end of the table, but for Watford both the performance and result offered reasons to be optimistic.
